US mobile phone group Cingular Wireless on Tuesday won a fierce battle for smaller rival AT&T Wireless after bidding $41 billion in cash to trump cellphone titan Vodafone Group Plc.The second-largest US wireless group, which is owned by regional carriers SBC Communications Inc and BellSouth Corp, bid $15 per share for third-ranked AT&T Wireless in what sources close to talks called a last-ditch, 11th-hour effort to secure a deal that was slipping from its grasp. The new, enlarged US mobile phone group leapfrogs market leader Verizon Wireless in terms of customers with a subscriber base of 46 million and combined annual revenues of more than $32 billion, Cingular said in a statement. “This combination is expected to create customer benefits and growth prospects neither company could have achieved on its own,” said Stan Sigman, president and chief executive of Cingular.SBC and BellSouth expected the deal to be dilutive to net and cash earnings per share in 2005 and 2006, and to boost cash earnings per share in 2007, Cingular said. The enlarged group expects to generate positive free cashflow in 2005. Analysts had expected Cingular to fight hard to outbid financially powerful Vodafone, which was eager to take control of a US operator and bring its brand across the Atlantic. But the bid values shares in AT&T Wireless at almost three times the value they were trading at last March. The takeover of AT&T Wireless, which officially called for bids last month, signals the start of long-awaited mergers in the fiercely competitive US mobile industry, where six national brands and a handful of regional players are battling for market share.Vodafone bows out Sources close to the situation have said that AT&T Wireless, which reported a fourth-quarter loss, lost nearly four per cent of its customers in January alone and saw its operating income in that month fall more than 20 per cent from a year earlier. But Cingular reiterated that it could cut billions of dollars in costs after a merger by reducing overlapping staff and assets. It said it expected to generate more than $1.0 billion in savings on operating expenses and capital expenditures in 2006 and more than $2.0 billion in annual savings from 2007. Shares in Vodafone surged in relief it had not won a nearnings-dilutive deal. The world’s largest mobile phone group by revenue said it had abandoned the auction and would instead stick to its 45-per cent stake in Verizon Wireless.“On 17 February 2004, Vodafone withdrew from the auction when it concluded that it was no longer in its shareholders’ best interests to continue discussions,” the company said in a statement. “Vodafone remains committed to its existing position in the US market with its successful partnership in Verizon Wireless,” it added. A company spokesman said relations with Verizon Communications, which controls Verizon Wireless, remained very positive. “We’ve worked together well in the past and we will continue to work well together,” he said.“The markets think it’s a good thing that Vodafone hasn’t overpaid, although in the long term, of course, it does leave them with a strategic problem in the United States,” said global equity strategist Patrik Schowitz at HSBC.“We are fully supportive of Vodafone’s decision to withdraw from the bid process,” added Karen Robertson, investment director at Standard Life Investments, which owns just over two per cent of Vodafone. NTT DoCoMo, Japan’s dominant mobile carrier and owner of 16 per cent of AT&T Wireless, is likely to take cash for its stake, a DoCoMo source said in Tokyo on Tuesday. Sources close to the auction told Reuters overnight that Vodafone had considered offering up to $39.4 billion, or $14.50 per share.
